Q My ex-wife and I are thinking of buying a flat together so we can be near my parents, family and our children (it’s a long story but we are comfortable together). We have found a very attractive place but have been told there is only 62 years to run on a 99-year lease.
As we don’t need a mortgage the financial side of things is not important, but we are concerned about what the lease might mean in the future were we to sell up at some point.
Should we be concerned? How easy or relevant is it to be able to extend a lease and is it possible, and does a short time on a lease make a significant difference to price? MT
A A flat with a lease shorter than 62 years will be difficult to sell to anyone who needs a mortgage. Some lenders are prepared to offer mortgages on properties with a lease of 65 years, but the vast majority will lend only if there is an unexpired lease of 75 or more years. So a short lease will limit potential buyers to those who can pay cash.
The good news is that it is possible – and relatively straightforward – to extend the lease. Once you have owned the flat for two years you have the right under the 1993 Leasehold Reform, Housing and Urban Development Act to extend your lease by 90 years. Information on the exact procedure is available from the Leasehold Advisory Service, but you basically get the ball rolling by serving what is called a section 42 notice on the freeholder.
The bad news is that, in your case, because there are fewer than 80 years left on the lease, extending it will be expensive because of what is known as the “marriage value”, which is essentially the amount by which a flat increases in value as a result of a new lease being granted. There are no hard and fast rules for calculating the value of any lease extension so it makes sense to use a surveyor with expertise in this area. You will find a suitable expert using the search facility on the website of the Association of Leasehold Enfranchisement Practitioners.